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Financial close management (FCM), the goal of which is to produce accurate financial statements, deals with all the activities needed to successfully close the books at month's end. However, my research indicates that most companies can do a better job with financial close management. These companies often complain about the length of the close, cost of the close and quality of the data produced. Clearly, finance owns the close and requires a good deal of support from IT, particularly in the form of financial close management software. Here are case studies (extracted from vendors' websites) of companies that have deployed FCM software successfully. These cases highlight common themes for FCM success. As always, these examples are illustrative and do not represent an endorsement of any vendor's software product.
Google uses Trintech's Cadency
On a monthly basis, Google needed to reconcile 320 balance sheet accounts across 15 to 20 entities throughout the Americas and more than an additional 300 accounts throughout the world. Before implementing Cadency, Google tracked reconciliation (stored in large binders) in Excel.
By deploying an automated system to replace manual systems, Google was able to reduce administrative costs. Because accounting is mostly a cost center, cheaper is always better (without sacrificing accuracy).
Google also obtained real-time visibility and access into the reconciliation process, from anywhere in the world. This improved the overall reconciliation process considerably.
Zurich of North America: using Blackline
Zurich of North America has more than 100 legal entities that generate records for thousands of general ledger accounts. The activities of the 26-person close and general accounting team are focused on a timely reconciliation and close process. The team realized that with thousands of reconciliations often managed in an uncoordinated way, the team could profit from a more standardized approach. This would inevitably simplify the variance analysis process.
Using Blackline, Zurich can set rules to auto-certify accounts, and now 40% to 50% of accounts are auto-certified. This makes the close faster, cheaper and more accurate.
By using standardized templates, there is a paperless approach for reviewing and approving accounts, which provides much greater accuracy.
In general, for Zurich the elimination of manual procedures provided immediate benefits.
Critical FCM activities
FCM activities include:
Journal entries: Making accounting entries using double entry bookkeeping
Account reconciliation: Ensuring that there is the right paperwork to support each journal entry, and therefore the closing account balance
Trial balance: Making sure that the debits and credits match
Adjusting journal entries: Adding items for things like depreciation and deferred revenues
Financial statements: Publishing results once all the journal entries are done and the balances are correct
Rabobank N.A.: using Tagetik
Rabobank National Association is the U.S. subsidiary of the $978 billion Rabobank Group. The North American subsidiary has $12 billion in assets, 126 branches and 700 business units. Aside from the complexity of the close in general, Rabobank had extraordinarily complex reporting requirements both for U.S. and Dutch regulators (at the parent company).
Using the Tagetik Repository, Rabobank met its goal of making all data uniformly available. Uniform visibility translated into more efficient and effective processing. The closing cycle was reduced by two days each month (by automating validations approvals, status updates, and so on) and the need to hire additional staff was reduced, all leading to reduced costs.
For an FCM software implementation to be as successful as these case studies show, IT and finance play an important role.
IT's role in FCM software implementation
The FCM software often must be integrated with enterprise resource planning and other financial software. In addition, middleware will need to be maintained.
FCM applications have critical files, and IT must ensure the security and encryption of sensitive files.
Workflow is an important part of FCM, and IT must integrate the vendor's product with existing applications. IT also must help integrate the FCM report writer with internal BI solutions.
Software vendor segments for FCM
Some vendors specialize in FCM only, while others offer FCM as part of their specialized offerings.
Specialists in FCM only: Adra match, Blackline, Trinitech
Enterprise performance management vendors offering FCM and other last mile of finance (LMOF) components: Host Analytics, Tagetik, IBM, SAS
Enterprise resource planning vendors offering FCM and other LMOF components: SAP, Oracle, Infor
Finance's role in FCM software implementation
The end goal of financial close management is to produce accurate financial statements for a corporation. Aside from meeting statutory requirements, these statements help the corporation with future operational and strategic planning. The finance department must integrate FCM software with the corporation's accounting software.
To reach its end goal, finance must create accurate account balances through the use of journal entries and account reconciliations. The role of FCM software is to help automate these tasks and make them visible throughout the corporation. This work is supported by work flow and analytical software.
Ultimately, without sacrificing the accuracy of financial statements, finance has an ongoing requirement to close the books faster and cheaper -- and financial close management software can help achieve that goal.
How to close the books faster
Streamlining processes with budgeting software
Tagetik software saves financial services big money